The 7 Most Important Focuses of a Trading Plan

Today’s goal is to show what 7 elements are the building blocks for an awesome trading plan. This process is critical as the key to success is formulating a trading plan with an edge and then implementing that edge consistently and with discipline. Plan the trade and trade the plan is truly the way to Forex success in 2014.

Creating an edge is a vital part of becoming successful. Not just any edge though, Forex traders need a winner’s E.D.G.E.:

1) E for entrepreneurship and expertise – treating trading as a business and showing accountability and building expertise in your field

2) D for direct & defined goals – having and working on SMART goals and a business plan

3) G for game and trading plan – creating a plan that can capitalize on E and achieve D

Why is it important to be, become, and remain a success Forex trader? What do you want to achieve with it? What is your vision and mission? Why is success important? And what will you do with it?

Write down your strong driving forces why you must succeed and what your expectations are for the process of reaching success and once you have reached success. Typically you want to think of motivational reasons that really drive you and provide you a mentality that “failure is not an option” and always keep you focused, energetic and motivated.

2) The Current Situation - know thyself

Knowing your strengths and weaknesses, your own pitfalls, emotions during stress, and characteristics & personality in general are crucial stepping stones for future success. The reason is because without proper syn-energy between your trading plan and your mental framework, the less chance of success. Forex traders must build a trading plan that is executable within their trading psychology.

a.) The best way to start is by evaluating oneself via :
– SWOT analysis (Strengths, Weaknesses, Opportunities, Threats)
– Color personality test.
– Read more about that here.

b.) If you have some Forex experience, then you can continue with this step. If not, then you will need to find out more information by talking to other Forex traders, to a Forex mentor, and via trial and error. The next step is to:
– Judge what your beliefs are of the market.
– Judge the current mindset about trading, market, yourself, business, and opportunities.
– Judge what type of trader you are and what trading style suits you. (long-term, swing trader, intra-week trade, intra-day trader, scalper)
– Judge what type of market environment you like to trade. (Reversal, trend, range)
– Judge whether you will use discretionary or non-discretionary trading method. If the former, what tools, parts, concepts are allowed discretion?
– Judge what types of analysis you will use (fundamental, technical, sentimental, chaos)
– Judge the time availability that can be dedicated to the business.
– Judge when can be traded, how often can be traded, how often the trade management can be monitored.
– Judge what instrument(s) to trade (Forex, currency pairs, Futures, etc).
– Judge what levels of risk you are willing to take and feel comfortable with.Read more here on how to build a trading strategy.

It is impossible to reach the desired goals without creating a plan to get there. The plan must incorporate smaller sub goals which break down the bigger goals into smaller, doable and workable steps. A Forex trader must then intensively work on implementing the road map. Without proper dedication the goals will never be reached. Then of course a Forex trader needs to evaluate and monitor the completion of this process to make sure they are on the right track – and if not, then the trader needs to readjust the road map to make it more realistic.

So here is the process simplified:

– Create sub goals and a road map with a to-do list and action plan to reach sub goals

e) When trading, keep an eye on one’s emotions to judge whether continuation of trading is desired

f) Always complete evaluations at the end of the trading day / week and review them periodically

g) Execute trading plan without fear, hesitation, and hope, and with patience and discipline, and with a balanced greed.

h) Plan the trade and trade the plan.

7) Playing out the edge - your daily routine

When a Forex trader has completed the entire process of creating trading plan (hopefully the full version as indicated in this article), then the next step is to implement the plan day in and day out, week in and week out, and finally year in and year out. This might seem monotonous to some. However, this process is important in achieving profitability in the long run with consistency.

To achieve this, a Forex trader must implement the trading plan as correctly as possible. Also the Forex trader must evaluate the implementation process. Simply put, there are only 2 reasons why a Forex trader could encounter losses in the long run:

1) The trading plan has lost its edge – trading plan needs adjusting

2) The trading plan is not being implemented correctly – trader needs to work on executing

All Forex traders can do within the heat of the trading, however, is implement the trading plan correctly. Only after actual trading and during the evaluation (preferably after a substantial and sufficient time period) can a trader judge whether the first point has indeed happened.

To ensure that the process of the trading plan is implemented correctly, Forex traders can use check list to ensure all necessary steps have been taken to complete the process successfully. Here are some ideas of a check list:

Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).

Thank you Fabrice for your feedback! Much appreciated! I am happy to hear that you enjoyed the article and find it useful

Talk to you soon in the 2014 succes program

Fabrice Goeyvaerts

Waouw Chris, awesome article! I am a bit late at reading it but so glad I did.
The content of your article shows very well that trading is a business and must be considered so if the goal is making money on the long run.

Lots of things to think about before making the first trade.
Tks for helping me completing and making some adjustments to my trading plan.

Disclaimer: Trading forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.